New NZSE law clears way for big fight

By DANIEL RIORDAN

Legislation allowing the New Zealand Stock Exchange to demutualise before a merger with its Australian counterpart will be introduced to Parliament next month.

The NZ Stock Exchange Restructuring Bill, finalised last week, aims to convert the exchange from a mutual owned by its 274 members to a company, removing structural impediments to the merger promoted by NZSE directors.

But the real battle will remain to be fought over the merger itself.

National Party finance spokesman Bill English says that while he sensed overwhelming support for a merger among NZSE members three months ago, he believes the broking community is now evenly divided on the issue.

He says demutualisation as an end in itself would be preferable to a merger.

"We'd prefer to see demutualisation as a step forward for the NZSE rather than the final act of a dying market.

"It's not at all clear that what effectively mounts to a takeover by the ASX [Australian Stock Exchange] will make it easier for local companies to raise capital."

One of the merger's most determined opponents, Macquarie New Zealand managing principal Ian Waddell, says the exchange still has not told its members why it thinks the merger is such a good idea.

Mr Waddell heads a group of brokers and others in the investment community opposed to the merger, which he believes has big implications for the economy. But he does support demutualisation.

Although NZSE members are divided on the merger's merits, support for demutualisation is widespread.

The restructuring bill needs the support of at least 61 of the 120 MPs to be passed, and it would seem to have these numbers.

Labour, which holds 49 seats in Parliament, has said it will support the bill if a majority of NZSE members do.

National, which has 39 MPs, has pledged unconditional support.

This renders superfluous the support of Act's nine MPs who, like Labour's, say they will support the legislation if it is the will of most NZSE members.

The Alliance, with 10 seats, has yet to adopt a position and the Greens' position is unknown.

Under the proposed law, NZSE directors will prepare a restructuring proposal.

This will include a method for establishing how ownership will be shared among members.

Members as of August 16 last year, and anyone who had applied on or before that date and whose membership is approved before meetings to vote on the proposal, will be eligible to vote.

The private bill is sponsored by Wellington Central MP Marian Hobbs whose constituency includes the NZSE offices.

Leader of the House Roger Sowry says the legislation will have priority as a private bill and is likely to go before the finance and expenditure committee late next month or in early March.

But it will be at least another three to four months before Parliament takes a final vote on it.

If the bill is passed, stock exchange members will then vote on demutualisation.

That would require the backing of 75 per cent of member brokers - who would be following the example of Australian brokers when the ASX demutualised and listed on its own boards in 1998.